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The Stability and Growth Pact - Essential and Unfeasible

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  • Jacek Rostowski

Abstract

The arguments for fiscal as well as monetary rules in a monetary union aiming at low inflation, the main weaknesses in the Stability and Growth Pact, and proposals for its reform are reviewed. Our own proposal for reforming the SGP is put forward: a requirement for eurozone Member States to enact entrenched legislation which would forbid budgets that led to public debt exceeding a certain proportion of GDP. Countries which failed to enact such provisions or which rescinded them could not remain in the eurozone. This would solve the key “enforcibility problem” that the SGP faces, without centralizing fiscal power in the European Commission. However, effective reform proposals are unlikely to be politically acceptable, and the SGP is likely to continue to be a dead letter. This suggests that the EMU was implemented prematurely.

Suggested Citation

  • Jacek Rostowski, 2004. "The Stability and Growth Pact - Essential and Unfeasible," CASE Network Studies and Analyses 0275, CASE-Center for Social and Economic Research.
    • Handle: RePEc:sec:cnstan:0275
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    References listed on IDEAS

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    1. Willem H. Buiter & Clemens Grafe, 2004. "Patching up the Pact," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 67-102, March.
    2. Buti, M. & Eijffinger, S.C.W. & Franco, D., 2003. "Revisiting the Stability and Growth Pact : Grand Design or Internal Adjustment?," Other publications TiSEM 2e5a01d9-9a1f-492d-995f-a, Tilburg University, School of Economics and Management.
    3. repec:bla:etrans:v:10:y:2002-07:i:2:p:445-468 is not listed on IDEAS
    4. Andrzej Bratkowski & Jacek Rostowski, 2002. "The EU attitude to unilateral euroization: Misunderstandings, real concerns and sub‐optimal admission criteria," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 10(2), pages 445-468, July.
    5. Buti, Marco, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34908, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Marek Dabrowski & Malgorzata Antczak & Michal Gorzelak, 2006. "Fiscal Challenges Facing the New Member States," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 48(2), pages 252-276, June.
    2. Marek Dabrowski & Artur Radziwill, 2007. "Regional vs. Global Public Goods: The Case of Post-Communist Transition," CASE Network Studies and Analyses 0336, CASE-Center for Social and Economic Research.
    3. Paolo Biraschi, "undated". "Searching for the optimal EMU fiscal rule:an ex-post analysis of the SGP reform proposals," Working Papers wp2008-7, Department of the Treasury, Ministry of the Economy and of Finance.
    4. Neményi, Judit & Oblath, Gábor, 2012. "Az euró bevezetésének újragondolása [Rethinking Hungary s prospective adoption of the Euro]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 569-684.

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